With the contracts for the Sandia and Los Alamos national laboratories both in flux, the Regional Coalition of LANL Communities has approached the state Legislature to ensure that whether a nonprofit or a for-profit entity secures those contracts, the $200 million in annual gross receipts tax from lab operations continues to flow into surrounding state and local governments.
“We’re not introducing a new tax, that’s number one—this is not a new tax, and this is about continuing what our communities are able to contribute, both to infrastructure for their community members but also for the laboratory,” says Andrea Romero, executive director of the Regional Coalition of LANL Communities, which represents nine cities, counties and towns surrounding Los Alamos National Laboratory. She presented the issue to the Legislative Finance Committee on Wednesday afternoon.
“We know this is the largest organization supplying jobs to our regional community and we obviously want to see it maintained, but also want to know that we can see this gross receipts tax as an addition to our ability to serve them and our communities better,” she told SFR ahead of that presentation.
The coalition has drafted language for a bill Romero says she hopes to see considered as soon as the special session beginning Friday and in place well ahead of December, when Sandia’s contract should be awarded to the next contractor with an expected start date of September 2017. A draft of the Los Alamos National Laboratory operating contract is expected early next year.
Both entities have been subject to gross receipts tax since 2010. If the next contract goes to a nonprofit entity that qualifies for a tax exemption, according to state policy, the recurring cash flow would evaporate overnight.
“If this goes away, it impacts everyone with the coalition,” Romero says. That includes Santa Fe County and the city of Santa Fe, which are both represented by the coalition. “What we’re trying to prevent from happening is this volatility in contractors that move into the laboratories. … The activities at the laboratory never change. Why does their tax status change based on the entity coming in? We’re just saying, we need to have some consistency.”
She also sees the shift as leveling the playing field so for-profit companies and nonprofits don’t need to differ in price based on taxes incurred.
“I think this helps on every front, to have consistent revenues within the state and local government and also to choose the best overall contractor regardless of their tax status,” she says.
With bids for Sandia’s contract in, Jack Jekowski, principal partner of Innovative Technology Partnerships and a DOE contractor for more than 50 years, told the Legislative Finance Committee, “What we’re facing right now with the re-competition for both Sandia and Los Alamos national laboratories is the distinct possibility that the new manager of those laboratories will be a nonprofit.”
As a for-profit entity, paying the gross receipts tax adds $60-$70 million a year in additional costs to the contractor, which the Department of Energy then had to bear.
“There was no new money for that, so it had to basically come out of program,” Jekowski told legislators. “The DOE would, of course, really like to see that money go into the program as opposed to taxes.”
“I would be very concerned if an award were given and we lost GRT to the state of New Mexico, primarily because these facilities need state support. They need infrastructure support, and who’s going to pay for that?” Rep. Patricia Lundstrom (D-Gallup) asked in response to the presentation. “If we don’t have some tax generated from this, how do we even help keep them supported in doing the job they need to do?”